Will Unions Kill Health Care Reform?
I have bad dreams. Nightmares, really. They used to be pretty rare. Every fortnight, maybe. But ever since the public employee union American Federation of State, County and Municipal Employees took a knife to Sen. Ron Wyden (D-Ore.), they've been coming more frequently.
Wyden, after all, is a liberal Democrat. AFSCME is a left-leaning union. Both are desperate for health reform. But AFSCME is spending its time attacking Wyden. Why? Because Wyden wants to replace the employer tax exclusion (I told you that thing was important!) with a progressive tax deduction that all Americans, not just those with good employer benefits, would get. That means the poorest among us would get slightly more and AFSCME's members might get slightly less.
But AFSCME isn't really attacking Wyden. The bill Wyden co-sponsored -- the Wyden-Bennett Healthy Americans Act -- has fallen out of the conversation. The energy right now is in Sen. Max Baucus's (D-Mont.) process, and maybe Sen. Ted Kennedy's (D-Mass.) coming proposal. Everyone expects the final legislation out of the Senate to include a cap of some kind on the employer tax exclusion. And that's really what AFSCME is going after here. They're hitting Wyden to demonstrate their willingness to attack anyone who touches their tax benefit. This is less an assault on Wyden than a warning to Wyden's colleagues.
And AFSCME isn't necessarily alone. The Health Care for America Now coalition, which includes AFSCME and other unions, has come out against touching the employer tax exclusion. The Economic Policy Institute has released a series of reports attacking the idea, including one, in partnership with First Focus, arguing that the taxing the health benefit will hurt the children. Actually, to be more precise, the e-mail I got said "TAXING HEALTH BENEFITS IS DETRIMENTAL TO CHILDREN." (I posted on a previous EPI report -- which I found unconvincing -- here.)
But you know what would be really bad for children? If health reform falls apart. And what these folks are doing is, essentially, attacking the main funding source for health care reform. That's not to say they don't have some alternatives. Last week, HCAN partnered with Citizens for Tax Justice to release a set (pdf) of "progressive" options for health care revenue (taxing the employer exclusion, incidentally, is also, indisputably, progressive). Here's what they came up with (click on the image for a larger version):
The ideas aren't bad. But they have no support. AARP, for instance, will howl when faced with the Medicare change. Sen. Chuck Schumer (D-N.Y.) opposes the capital gains change. And so forth. The unions haven't spent the last few months laying the groundwork for these revenue options. And it's rather late in the game -- the finance committee wants a bill in June, and their set of revenue options was released a week ago -- to slap a random set of new taxes on the table.
And all this elides a simple fact: Capping the employer health care exclusion is good policy. Eliminating it entirely would be better policy. It's true that some unions, like AFSCME, would see the value of their employer benefits degrade slightly. (Some unions, like Service Employees International Union, would scarcely be affected at all. Janitors are not, as a rule, given generous employer health benefits.) But the labor movement, as a whole, is much worse off in a world where the employer exclusion is capped but we have health reform than in a world where we don't have health care reform and can't control premium costs.
In that world, employers who offer health benefits will be ever less competitive against their stingier competitors. Union shops will close as the associated labor costs become unsustainable. Employers will fight ever harder against unionization because they'll be terrified of being trapped into health coverage arrangements that they can't control.
It's hard to fault AFSCME and friends for some early positioning. This is the game, as they say. And as we near legislation, it's going to get more fierce. But I hope they're keeping a clear head here. I doubt they have time to build support for a raft of new taxes. And health care reform with a cap on the tax exclusion is better -- even for the unions -- than no health care reform at all.
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